INSTITUTIONAL MECHANISM FOR
CLEARANCE OF LARGE SCALE PROJECTS 13:59 IST The Prime Minister, Dr.
Manmohan Singh announced that a new Rehabilitation Policy will be finalized
in the next three months, which will be more progressive, humane and conducive
to the long term welfare of all stakeholders in our economy.

In his Inaugural Address
at the FICCI Annual General Meeting here today, Dr. Singh said that there
is no reason why the spread of industrialization should be a contentious
issue in our country. “Issues such as land acquisition and displacement
of people and their rehabilitation and resettlement should be transparently
and effectively addressed. They can and they will be”, he added.

The Prime Minister announced
that he would ask the Finance Ministry and the Investment Commission to
suggest an institutional mechanism whereby large scale projects both in
the public and private sectors are facilitated so that they take off as
originally planned.

Calling for a more socially
responsible business. Dr. Singh asked the Indian industry to be sensitive
to the needs to empower the weaker sections of the society, particularly
the scheduled castes, scheduled tribes and minorities, so that they too
can benefit equitably from processes of economic and social development.
“Industrial development must not be a zero sum game. It need not, it can
be a win-win process for all sections of society and we all must strive
to make it happen”, Dr. Singh asserted.

Stressing that our tax regime
should be liberal, but equitable, the Prime Minister said, “We will now
move towards a common GST and better harmonization of VAT rates as well.
In the long run, our tax regime should not have too many exemptions which
make tax administration an unnecessarily complex exercise vulnerable to
misuse.” As we gradually integrate India into the global financial system
and as we gain confidence in our economy’s abilities, Dr. Singh said that
we will gradually move into a less restrictive forex regime.

Amidst all the hype about
accelerating growth and a buoyant market, Dr. Singh stressed that we must
not lose sight of the fact that we have to sustain a much higher rate of
investment, keep inflation under control, generate more employment opportunities,
impart a new element of dynamism to our agriculture and wage a decisive
war against poverty, ignorance and disease.

Stressing the need to clean
up the act in the power sector, the Prime Minister said that the meeting
of Chief Ministers which has been called in February will address the bottlenecks
constraining this sector, particularly the viability of distribution companies.
“It is my solemn assurance that the power sector will secure the priority
attention of our government this year which it deserves”, he added.

Stating that India would
like to be a member of the wider Asian Economic Community, Dr. Singh said
that Indian industry can no longer seek excessive protection through tariffs
and must prepare for the brave new world of global integration. He also
asked Indian business to be prepared for a more fast-track economic integration
in South Asia. He expressed hope that Indian and Pakistani business leaders,
as indeed business leaders from the region as a whole, will strengthen
the hands of the political leadership in promoting peace, security and
friendship in our region.

The Prime Minister presented
FICCI Corporate Awards. Following is the text of the Prime Minister’s address
on the occasion:

“Wish you all a very happy
and prosperous new year! I am happy to be here once again at your Annual
General Meeting. I compliment Shri SK Poddar and my former student Dr Amit
Mitra for their energetic leadership of FICCI during the past year. I wish
Shri Habib Khorakiwala a very active and productive year ahead as President
of FICCI. I am deeply impressed by the quiet and effective efficiency with
which Dr Mitra has re-energised FICCI over the past decade. I must thank
him and FICCI for the support that has been extended to the Government
for the many initiatives that we have undertaken in the last 15 years.

Organisations like FICCI,
with your extensive contacts, have played a constructive role in facilitating
greater political consensus in favour of economic policies that will take
our country forward. There is, however, an unfinished agenda that is yet
to be completed. You have, therefore, much more work to do in shaping new
policy foundations in the year that lies ahead!

We meet at a very opportune
moment in our recent history. There is an air of optimism about our economic
prospects. The manufacturing sector is buoyant and both old and new industries
find new market opportunities emerging. The services sector continues to
drive growth and generate employment for millions of our citizens. For
the first time ever the annual inflow of foreign direct investment, measures
in billion of dollars, will go into double digits.

From being demand-constrained
in the past, economic growth now appears to be supply-constrained. Be it
power, be it port capacity, be it supply of skilled manpower - a variety
of supply bottlenecks are threatening to hold up the growth rate back.
A major responsibility for us in government is to help relax this supply
constraint. If a youthful population is our great asset, we need to make
them skilled and capable of securing gainful employment. This requires
a huge expansion in vocational education and this is certainly on the anvil.
We have started work on a Vocational Education Mission and I hope to see
tangible steps being taken in this direction in the next few months.

The Government and our macro-economic
authorities also have the responsibility of ensuring that fiscal discipline
is maintained even as we work to promote growth with equity. Our tax regime
should be liberal, but equitable. It should be transparent and not subject
to excessive administrative discretion. I have great faith in the inherent
honesty of our people, and we must respect that and based on that presumption.
When there is transgression it must of course be visited upon by predictable
action. The introduction of VAT in most states of the country has been
a matter of satisfaction. We will now move towards a common GST and better
harmonization of VATrates as well. In the long run, our tax regime should
not have too many exemptions which make tax administration an unnecessarily
complex exercise vulnerable to misuse.

It is also incumbent upon
us to ensure transparent functioning and regulation of markets. Even the
most open market economy requires regulatory supervision. In hopeful and
optimistic times such as these, we must guard against irrational exuberance
and ensure stability of markets.

One of the areas of successful
reform in the past decade has been that of the financial sector. India’s
standards and regulatory institutions are now world class. We have to preserve
the integrity of this system and ensure that financial discipline is maintained.
Our monetary authorities have the responsibility to ensure stability in
the financial, foreign exchange and money markets while sustaining the
growth process. As we gradually integrate India into the global financial
system and as we gain confidence in our economy’s abilities, we will gradually
move into a less restrictive foreign exchange regime. The recommendations
of the Tarapore Committee are a step in this direction, mixing caution
with optimism.

I must draw your attention
to the fact that our sense of optimism must be balanced by realism about
the problems at hand and the hurdles we still need to cross. Even as the
optimism about our prospects make us hold our head high, realism about
the challenges we face ensures that our feet are firmly on the ground.
A realistic appreciation of what needs to be done is therefore very necessary.

Amidst all the hype about
accelerating growth and a buoyant market, we must not lose sight of the
fact that we have to sustain a much higher rate of investment, keep inflation
under control, generate more employment opportunities, impart a new element
of dynamism to our agriculture and wage a decisive war against poverty,
ignorance and disease.

To win this war, however,
we need more productive investment. We have to create more jobs in the
non-farm sector, both in rural and urban areas. The revitalization of our
agriculture is an opportunity as well as a challenge – both for the government
and the private sector. If we have to bridge the rural-urban divide and
the regional economic divide, and we must, we need to transform the agriculture
and allied sectors. The problems are well known. We need to look at efficient
and effective solutions. As I see many business houses entering into mass
retailing, I hope the supply chains being built will reach out directly
to farmers, ensuring more remunerative prices. The Integrated Food Law
has been passed by Parliament and we will be operationalising this in the
next few months. This will, I believe, impart a new element of dynamism
to our agro-processing industries. We have to invest more and invest efficiently
in better infrastructure – both the physical infrastructure which Shri
Poddar referred to and the social infrastructure of health and education.
This we are committed to doing.

I do believe that in the
past two years our Government has succeeded in altering the state of expectations
in our economy. Apart from the higher rate of investment, which is now
at an all-time peak of 31% of GDP, what has sustained the above 8% annual
rate of growth of the economy is the altered state of business expectations.
New opportunities are being created to promote public private partnerships
for the expansion and modernization of infrastructure sectors. Not only
do we have a goal of investing over US$ 320 billion in our infrastructure
in the next five years, we have also created the necessary institutional
structures and tangible investment opportunities to enable this investment
to actually materialize.

In fact, the turnaround and
the revitalization of Indian Railways is a classic example of what good
governance with a focus on basics can achieve in a reasonably short period
of time. The unparalleled growth taking place here and the public-private
partnerships happening in the dedicated freight corridors, the operation
of container trains and the management of railway stations is an example
for all other infrastructure sectors. Even the road sector has an extensive
plan for rolling out top class highways in every nook and corner of our
country through a BOT model. As Shri Poddar has mentioned, the Ultra Mega
Power Projects have demonstrated the possibility of producing power at
extremely competitive rates through private investment. However, we still
need to clean up the act in this critical sector and the meeting of Chief
Ministers which has been called in February will address the bottlenecks
constraining the power sector, particularly the viability of distribution
companies. It is my solemn assurance that the power sector will secure
the priority attention of our government this year which it deserves.

Like Lord Keynes, I do sincerely
believe that in a world of uncertainty, risk-taking and enterprise are
deeply influenced by the state of expectations. When investors worry about
the present and are uncertain about the future, investment activity is
undoubtedly dampened. However, when investors are reassured by the present
and reasonably optimistic about the future, they invest in making the future
happen. Today the state of expectations of our investors is positive. They
feel reassured by the various steps we have taken and by the new dynamism
exhibited by Indian enterprise and professionals in recent years both in
India and abroad.

However, to sustain the positive
state of expectations we need able political and economic management. We
need farsighted leadership at all levels. We need, above all, greater political
consensus in favour of forward-looking policies. Policies that attract
new investment, policies that create new jobs, policies that create new
capacities, capabilities and skills, policies that empower our producers,
our workers, our farmers, our artisans, our engineers and scientists and
all productive sections of society to improve upon their past performance.

I am aware that there is
much we have to do to further accelerate the growth rate and make growth
more inclusive. The Approach Paper to the Eleventh Five Year Plan sets
out in detail the constraints facing our economy and the policies we must
adopt to step up the rate of growth of savings, revenues, investment, income
and employment. I am confident that our economy now has the steam and the
energy to move to a higher growth trajectory. Our Government will take
all necessary steps to sustain the buoyancy in our economy and the optimism
of our investors. I notice that not all proposals for investment in large
projects materialize owing to various hurdles and bottlenecks. Many of
these require inter-ministerial action or close coordination between the
center and the states. I will ask the Finance Ministry and the Investment
commission to suggest an institutional mechanism where large scale projects
both in the public and private sectors are facilitated so that they take
off as originally planned.

It is our responsibility
in Government to create an environment conducive to improved economic performance.
Equally, it is the responsibility of business to ensure that our firms
become more globally competitive and more consumer friendly. Our economy
has to be more closely integrated with that of our immediate and distant
neighbours. FICCI has played an active role in promoting the idea of regional
economic cooperation both in the context of South Asia and South-east Asia.

Later this week I will be
participating in the East Asia Summit. We remain committed to increased
economic interaction between India and the economies of East and South-East
Asia. We would like to be a member of the wider Asian Economic Community.
This requires greater openness on our part. Indian industry must accept
the challenge of greater openness and must prepare itself. We have laid
out a timetable for tariff reduction and we must adhere to that timetable.
Indian industry can no longer seek excessive protection through tariffs
and must therefore prepare for the brave new world of global integration.

Indian business must also
be prepared for a more fast-track economic integration in South Asia. As
the region’s largest economy, we must be more open to our neighbours. I
must compliment FICCI for the initiative it had taken nearly a decade ago
to strengthen business-to-business relations between India and Pakistan.
I recall that a FICCI delegation had gone to Pakistan in 1995 to promote
closer economic relations. Thanks to FICCI’s efforts, the India-Pakistan
Chamber of Commerce and Industries was set up. I hope Indian and Pakistani
business leaders, as indeed business leaders from the region as a whole,
will strengthen the hands of the political leadership in promoting peace,
security and friendship in our region.

I sincerely believe, as I
have said so often, that the destiny of the people of South Asia is interlinked.
It is not just our past that links us, but our future too. India cannot
be a prosperous, dynamic economy and a stable polity if our neighbourhood
as a whole is also not economically prosperous and politically stable.
Similarly, our neighbours cannot prosper if India does not do so as well.
There are I believe, enormous opportunities for promoting mutually beneficial
cooperation in South Asia. To exploit these opportunities, the nations
of South Asia have to work sincerely to control the scourge of terrorism
and extremism.

Recently, at a public meeting
in Amritsar, I spoke of how I envisage relations with Pakistan. I earnestly
hope that the relations between our two countries become so friendly, and
that we generate such an atmosphere of trust and confidence between each
other, that the two nations would be able to agree on a Treaty of Peace,
Security and Friendship. In the increasingly globalised and integrated
world we live in, political borders are no longer economic and social barriers.
I dream of a day when, while retaining our respective national identities,
as Nation States, one can have breakfast in Amritsar, lunch in Lahore and
dinner in Kabul. That is how my forefathers lived. That is how I want our
grandchildren to live.

These are good times for
Indian business. But with greater opportunity comes greater responsibility.
You must pay due attention to improved corporate governance. You must be
sensitive to the urgent need to protect our environment and to prevent
degradation of our land, water and air resources. You must ensure that
the interests of your shareholders and stakeholders are best served. Even
as you demand a more hospitable environment for business, you must become
more socially responsible. There is no reason why the spread of industrialization
should be a contentious issue in our country. Issues such as land acquisition
and displacement of people and their rehabilitation and resettlement should
be transparently and effectively addressed. They can and they will be.
We will be finalizing a new Rehabilitation Policy in the next three months
and this will be more progressive, humane and conducive to the long term
welfare of all stakeholders in our economy. Indian industry must be sensitive
to the needs to empower the weaker sections of the society, particularly
the scheduled castes, scheduled tribes and minorities, so that they too
can benefit equitably from processes of economic and social development.
Industrial development must not be a zero sum game. It need not, it can
be a win-win process for all sections of society and we all must strive
to make it happen. I am convinced that if we act wisely and with the best
interests of the country at heart, we can transform our economy and society.
I believe we are on the threshold of a new era of knowledge-based development.
The country requires long-term and strategic thinking. As captains of Indian
industry you can play a pro-active and constructive role in this process.

In a democracy politicians
will perforce take a short-term view. After all, one has to be in office
to make a difference! A politician has to think of the next election, even
if he speaks for the next generation! You might perhaps say that your horizon
is even more limited. That you have to think about the next quarter’s balance
sheet results! That is fair enough.

However, it is incumbent
upon all of us to think of our country’s future, and the need to build
a progressive and equitable polity and society. It is with this sense of
patriotism and forward looking thinking that FICCI came into being. That
is how, I remember the late Shri G.D. Birla, J.R.D. Tata, late Sir Sriram,
Sir Padam Bhai Singhania and all the stalwarts who were pillars of strength
to this great organization. I urge you to continue to work with that spirit
of your founders and stay faithful to their grand vision and aspirations
for the future of our country. I wish your Annual Meeting all success.”